UK Trade Minister Lord Green "has serious questions to answer" over his time
running HSBC after the bank was forced to apologise before the US Senate for
failing to stop a multi-billion-dollar laundering operation for drug gangs
and terrorists.

Photo: PA

By Telegraph staff

12:13PM BST 18 Jul 2012

Lord Green was chief executive of London-based HSBC from 2003 to 2006 before becoming its chairman until 2010. He was appointed to the House of Lords when Prime Minister David Cameron made him Trade Minister last year.

In November last year he was given the role of supporting Chancellor George Osborne on Treasury matters, "in particular financial services and banking issues. He is already a member of the Cabinet Committee for Banking Reform," the Treasury website states.

He is also an ordained priest in the Church of England and author of Good Value: Reflections on Money, Morality and an Uncertain World.

Today, a Treasury spokesman for the Labour Party challenged Lord Green to reveal if he knows anything about the scandal, which has led to the resignation of the bank’s head of compliance.

“The US Senate sub-committee’s report, which suggests that HSBC allowed money laundering by drug cartels and possibly even terrorists, is so serious that the bank’s head of compliance has already resigned,” Chris Leslie said. He added that Lord Green “now has serious questions to answer about what he knew and when”.

The Department for Business, where Lord Green is a minister, told Bloomberg it had no immediate comment.

HSBC publicly apologised yesterday after the US said the bank was “pervasively polluted for a long time” as it allowed funds to be shifted to and from its branches in North America as far afield as Mexico, Syria, the Cayman Islands, Iran and Saudi Arabia, the hearing was told on Tuesday.

Issuing an apology, Stuart Gulliver, current chief executive of HSBC, said: “We have sometimes failed to meet the standards regulators and customer expect… we take responsibility for fixing what went wrong.”

HSBC, the only British bank with US branches, is now braced for a “substantial” fine which analysts said could be up to $1bn (£640m). The latest banking scandal comes in the wake of Barclays’ £290m fines for its role in rigging Libor.

The hearing by the Senate’s Committee on Homeland Security was the culmination of a year-long investigation. Its 335-page report into HSBC saw the committee sift through 1.4m documents and interview 75 HSBC officials, as well as bank regulators. It highlighted damning examples of lax controls and inadequate compliance by staff at HSBC’s 470 US branches.

The bank allegedly ignored specific US measures designed to prevent transactions being made involving terrorists, drug lords and rogue regimes. Two HSBC subsidiaries, for example, processed 25,000 transactions over seven years, worth a total of $19.4bn, without disclosing that the cash had links to Iran. The bank is also alleged to have moved billions of dollars in cash from Mexican subsidiary HBMX to its US network – despite being warned by both US and Mexican authorities that such sums could only be linked to drug trafficking.

The report said that HSBC accepted more than $15bn in cash between 2006 and 2009 from Mexico, Russia and other countries at high risk of money-laundering but failed properly to monitor transactions. The bank even managed to label Mexico, ravaged by corruption and drug wars, as “low risk”, the committee said. HSBC also provided US dollars and banking services to banks in Saudi Arabia and Bangladesh despite apparent links to terrorist financing, according to the report.

David Bagley, HSBC’s global head of compliance who had worked at the bank for 20 years, today resigned from that job in front of the committee. Mr Bagley, who will stay with the bank, admitted HSBC had “fallen short of our own and regulators’ expectations”.

Senator Carl Levin, who led the committee’s investigation, said HSBC’s lack of controls in America and abroad between 2006 and 2010 had been “a recipe for trouble”.

The report said many of the abuses occurred as a result of HSBC’s failure to monitor its so-called “bearer share accounts”, facilities that legally keep secret the owners and some transactions. At one stage the Miami branch had 1,670 bearer share accounts, holding $2.6bn of assets and generating revenues of $26m. Mr Levin told the hearing: “In an age of international terrorism, drug violence in our streets and on our borders, and organised crime, stopping illicit money flows that support those atrocities is a national security imperative.”

The chairman accepted HSBC had overhauled its systems since the failures were found and was “committed to cleaning its house”.

The investigation into HSBC is the latest US attempt to crack down on money-laundering. Last month, ING agreed to pay $619m to settle allegations that it broke American sanctions against Cuba and Iran.